Deep Dive Episode 146 – Fireside Chat with FTC Commissioner Noah Phillips

The House Judiciary Committee’s Antitrust Subcommittee recently released findings of a 16-month investigation into competition in the digital economy. The 449-page staff report, “Investigation of Competition in the Digital Marketplace: Majority Staff Report and Recommendations”, proposes sweeping changes to U.S. antitrust laws and enforcement that could have far-reaching effects throughout the economy.

This live podcast featuring FTC Commissioner Noah Phillips, Svetlana Gans, and Koren Wong-Ervin features an insightful look at the report, its findings, and its potential ramifications.


Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.

[Music and Narration]


Operator:   Welcome to The Regulatory Transparency Project’s Fourth Branch Podcast Series. All expressions of opinion are those of the speaker.


On November 18, 2020, The Federalist Society’s Regulatory Transparency Project hosted a fireside chat webinar with FTC Commissioner Noah Phillips. The following is a recording from that event. We hope you enjoy the interesting and engaging discussion. 


Nathan Kaczmarek:   Good morning and welcome to this Regulatory Transparency Project webinar. Today, our theme is, “The House Judiciary’s Antitrust Staff Report.” It’s an important topic, and we’ve gathered some very knowledgeable attorneys to discuss it with FTC Commissioner Noah Phillips. 


My name is Nate Kaczmarek. I am Vice President and Director of the Regulatory Transparency Project for The Federalist Society. Per usual, please note that all expressions of opinion are those of our guests today. 


Today, we’re mixing up the format a little bit. And we’re pleased to have Svetlana Gans and Koren Wong-Ervin to both interview Commissioner Phillips. Koren is a Partner at Axinn, Veltrop, Harkrider LLP. She previously served at the FTC as counsel for intellectual property and international antitrust and as an attorney advisor to Commissioner Josh Wright. Her experience includes representing defendants and plaintiffs in high stakes litigation and representing technology companies in domestic and foreign investigations.


Svetlana serves as Vice President and Associate General Counsel at NCTA, where she advances NCTA’s policy positions on competition, privacy, and advertising issues before federal agencies and Congress. Previously, she served as the chief of staff for FTC acting Chairman Maureen Ohlhausen. She currently serves on the council of the ABA Antitrust Section. 


If you’d like to learn more about all of our guests today, you can visit our website which is That’s, where we have each of our guests’ complete bios.


In a moment, I’ll turn it over to Svetlana. Once our panel has had ample time to pepper the Commissioner with questions, we’ll go to audience Q&A. So please think of the questions you’d like to ask. Audience questions can be submitted via the Zoom chat function at the bottom of your screen. 


With that, Svetlana, Koren, Commissioner Phillips, thank you very much for being with us today. 


Hon. Noah Phillips:   Thanks for having me, Nate. 


Svetlana Gans:   Thanks so much, Nate. So thank you, Nate, and thank you to the entire FedSoc team, Colton and Braun(sp), for your assistance today. And thank you also to Commissioner Phillips’ staff Anna for all her assistance for today’s event. 


I am honored to introduce FTC Commissioner Noah Phillips for this fireside chat this morning. Commissioner Phillips began his term as an FTC commissioner in May of 2018. Previously, Noah served as chief counsel for Senator Cornyn of Texas on the Senate Judiciary Committee where he advised the Senator on a variety of legal and policy issues. 


Since joining the FTC in 2018, Commissioner Phillips has been an avid proponent of strong IP rights, the rule of law, and agency transparency. Commissioner Phillips has written extensively on whether it is time to rewrite the antitrust laws, and we hope to hear many of his thoughts this morning in conjunction with our conversation today. 


So with that, I’d like to welcome Commissioner Phillips.  


Hon. Noah Phillips:   Thanks, Svetlana. Great to be here with you.  


Svetlana Gans:   So Nate discussed a little bit of the format. Koren and I will be asking the Commissioner some questions about the House report. We encourage you to please utilize the chat feature if you have any questions. And we’ll also take questions at the end of the program about 10 minutes to 12. So with that, I’ll turn it over to Koren to introduce the report. 


Koren Wong-Ervin:   Great. Thanks Svetlana and thanks Nate. Hello, everyone. I am Koren Wong-Ervin. And as just a little bit of background, on October 6, the majority staff of the House Judiciary Committee released about a 450-page report on antitrust. Now, the report is entitled, “Investigation of Competition in Digital Markets,” but it’s really important to take note that there’s about a dozen recommendations that apply across industries not limited to digital markets.


So these include things like interjecting vague and subjective standards such as democratic ideas into antitrust analysis, shifting burdens and creating presumptions of illegality for mergers and common place conduct, and even prohibiting beneficial product improvements, including for life saving drugs, when they would make it more difficult for rivals to compete.


There’s also a number of recommendations that extend beyond antitrust, so things like removing safeguards and lessening standards for class action litigation and prohibiting so-called forced arbitration clauses in private agreements. So thank you, Commissioner Phillips, again for joining us and for this discussion. And I will turn it back over to Svetlana to kick us off with some questions. 


Svetlana Gans:   All right. Thank you so much, Koren, for that overview. So, Commissioner Phillips, I know you’re going to give us your usual disclaimer at the beginning, but after you do that, can you give us a brief overview of your thoughts about the report? 


Hon. Noah Phillips:   Sure. Thanks, Svetlana. The disclaimer being what I’m going to say is my view and not necessarily the view of the Commission or my fellow commissioners. 


In terms of the report, I think I actually just begin as a former staffer. I worked as a staffer on the Senate Judiciary Committee, not the House, for seven years. So I have some appreciation for the level of effort and thought that goes into a project of this size and scope. And it is a tremendous undertaking. The staff for the Committee collected tons of documents, we spoke to lots of companies and experts. They convened, really, a wide ranging of series of hearings, and they’ve come up with a tremendous piece of work product. 


So I just — I have to start by saying I think it reflects a lot of talent and execution. And as a former staffer, I really appreciate that. That’s not something that happens every day, and I give kudos to the folks behind it. That takes vision and it takes execution, and those aren’t always things in broad supply in the legislative world or even in other parts of the world. 


Two other thoughts that jump to mind. First is that the report is one of a number of similar reports that have looked at issues in the digital economy. We’ve seen that in Australia. There’s the Furman Report out of the U.K. There’s the Stigler Report out of the University of Chicago here. The list goes on, actually, beyond those. Of course, the E.U. has been putting out lots of paperwork. 


One of the things that makes this one more interesting is I think it is a little bit more of an indictment in the sense that it doesn’t spend as much time dealing with the positive aspects of the companies on which it focuses. And while all of these companies deserve scrutiny for purposes of antitrust and other issues, like privacy, I think that understanding their position in the market and why they are so popular with consumers is a really important part of the story. And part of that understanding is understanding what they provide. And I think that that probably could’ve used a little more focus. 


But the thing that jumps out at me most and above all is the fact that the report focuses on four very large, very important companies. But then it moves on from case studies of those companies to broad descriptions for laws generally and reform of laws generally. And I do think that in order to get from a place of we saw this concern with one or even four firms, although these are four very different forms with different business models too, and so we need to do a fundamental change in the law that will affect all firms, I think, requires more.


Koren Wong-Ervin:   Great. Thank you, Commissioner. So let’s move onto some of the specific proposals, the broad-based ones like you mentioned. So one of the proposals is to ban firms with 30 percent or more market share from acquiring startups or nascent or potential competitors unless they prove a negative, right, unless they prove that the merger will not cause harm to competition. So it’s a shift of the burden.


The report also proposes that we would eliminate the existing requirement for plaintiffs to prove that absent the merger, there’s a likelihood of entry, right, so that this is a real, competitive threat, not just something that documents have said we plan to maybe enter but a real capital request or something. 


So I’d love to hear your thoughts on the proposal and what you think might be potential consequences for business, for venture capital funding, for consumers, and for innovation. 


Hon. Noah Phillips.:   So to some extent, these proposals remind me of the proposal not so many months ago from Senator Warren and Representative Ocasio-Cortez and Congressman Cicilline, whose staff are the principal authors of the report that we’re talking about today, to ban all mergers during the pandemic. 


I wrote a bit and spoke a lot about why the factual predicate for such a ban wasn’t accurate, right. Merger filings were going down as they tend to do in a period of economic crisis, not rising. We weren’t overwhelmed, which was the claim for why you needed an outright ban. But the way some of these proposals work, if you take into account how the agencies approach things like efficiencies today, which is, by the way, with a terrific amount of skepticism, what these amount to are real attempts to just chill MNA behavior in general and across a pretty wide swath of the economy. And I don’t think that’s warranted. 


One of the things that concerns me when you talk about startups, in particular when you think about two areas on which we the FTC focus a great deal, and that is what we colloquially these days call tech and biotech. These are ecosystems. They’re ecosystems involving tremendous venture capital investment, investment predicated on some losers, some unicorns, and just a fair amount of MNA in the middle. 


They’re also ecosystems predicated on acqui-hires, right, hiring small companies or acquiring IP small companies with people. There’s a lot of writing, and some of that writing underscores a lot of the interesting work that Chairman Cicilline has been doing on the impact of non-competes in the economy and in California. And there’s famous paper from years ago that looks at why is California so much more innovative than Massachusetts, my home state? 


One of the theories is that people move around a lot, like they get hired to big companies. They learn how those big companies work. They leave those companies, and they start their own companies. So stoking innovation though teaching people and watching them move around, stoking innovation through incentivizing venture capital, these are good things. 


These are things that we don’t want to get rid of. They’ve been part of America’s economic success, not just in California but elsewhere. And I think that we need to be pretty careful when we start talking about shutting down the systems that have generated so much economic growth, not to mention, right, benefits for consumers and innovation and patience that all of us care about. 


I think one of the things to think about is that the category of behavior is much broader than the few cases that are often cited to support the solution. And when you’re talking about banning a wide swath of activity, much of which is good affirmatively, a lot of which may be neutral, I think you’re talking about throwing the baby out with the bath water. And this is a pretty important — or these are pretty important babies. 


Svetlana Gans:   All right, thank you. So I wanted to turn to one of my favorite topics, the consumer welfare standard. It’s been the talk of the antitrust town for quite a while now. The report intends to extend the consumer welfare standard to not just protecting consumers but also workers, entrepreneurs, independent businesses, open markets, a fair economy, and democratic ideals. 


You recently wrote a speech on this topic as to whether you thought this approach would be administrable and the correct approach. So I was curious if you could share your thoughts here. 


Hon. Noah Phillips:   Yeah. So I start with that old phrase, he who serves two masters serves none. And there are times where competition enforcement and consumer welfare can do a great job supporting lots of other values, just as in the corporate context, right, the pursuit of shareholder value can help create jobs for workers, reduce prices for consumers, improve quality for them as well.


But explicitly, as a matter of law, recognizing multiple different and often competing goals for a particular area of law enforcement or regulatory endeavor often times is a recipe for failure on all counts, right. You’re not going to be as effective, and it invites all sorts of gamesmanship. 


There’s a famous quote from years ago by a really important antitrust enforcer at the Department of Justice about national security, wondering where we would be if we just had to follow the dictates of the Department of Defense on what we do. And I think that asking any kind of law enforcement agency, whether you’re doing shareholder protection at the FCC or you’re doing consumer protection at the FTC, in the context of consumer welfare, to pursue multiple and opposing goals, I think it’s, again, it’s a recipe for not succeeding at any of those goals. 


It also, again, can invite gamesmanship and even, really, political intervention in ways that I think are ultimately counterproductive in national interest. I will say this. One of the interesting things about that language in the report and some of the goals to broaden into, like, a public interest type standard, what today is the consumer welfare standard is that they go up against other proposals to create bright line rules.


And to some extent, I think there is a dichotomy of thinking among antitrust reformers. Should we just be expanding what we’re doing today in a kind of vague sense? And then we can pick our targets or pick what we think is bad depending on a particular context rather than a rule of law versus those who say, like we were just talking about a moment ago, these bright line rules of we’re going to accept the cost of just banning positive things and just do away with everything. 


Koren Wong-Ervin:   Thank you, Commissioner. I really appreciate your remarks. When I think about antitrust and consumer welfare standard, I think about the fact that it tethers antitrust to the methodological rigors of economics in terms of theories that can be tested and rejected, right, or tested and approved. And I don’t know how you would test for employment versus consumer welfare versus — you know, all these different things. 


So let’s move onto —


Hon. Noah Phillips:   Sorry. I was just going to add, there’s an interesting corollary debate going on in the context of corporate governance today. You see this played out in statements back and forth of the SEC commissioners, in promulgating round business and responses to it. Should we stop pursuing the welfare of our shareholders and instead look more broadly? 


And I think it invites — well, first of all, I think that debate is cunning to antitrust. But also, I think it invites the government in to substitute its judgment for which stakeholders ought to win there in the context of corporate governance, here in the context of antitrust enforcement. And I think there’s a lot of mischief that can go on when we open that door. 


Koren Wong-Ervin:   Yeah. And I think it’s nice that this is one where we really have bipartisan support. I mean, when I was at the Commission, then Chairwoman Edith Ramirez gave a great speech in China, really talking about the lack of administrability and the harm to credibility in antitrust and also the risks of really harming consumer welfare, trading off short term static for long term dynamic. 


So I’ll just turn now back to one topic I mentioned in the intro which is product design. So as I mentioned, the report would prohibit product designs that they say harm competition or harm what they call the competitive process, regardless of the benefits to consumers. 


So as we know under existing antitrust law, courts are very reluctant to judge what is a beneficial product improvement, right. They say courts are generally ill-equipped to do that. So they are very deferential and also recognizing the empirical literature that there’s tremendous benefits from even incremental or small product improvements.


So I’d love to hear your thoughts on this and what you think might be possible ramifications for innovation and consumers. 


Hon. Noah Phillips:   Sure. Let me guess the ramifications in a minute. To me, this very much lines up with some of the rhetoric that we hear on the left but also on the right about corporate power, right, the idea that the existence and the success of large corporations, including their ability to innovate and to expand into new markets, is itself a problem. That, if your lens for the world is generally fighting corporate power, whatever that means, and I submit that one of the things it means is people take views about how that power ought to be exercised, whether for workers, whether for consumers, whether for the government, what have you. 


If that’s your lens, this kind of thinking makes sense, right, because you’re worried about allowing the already powerful to acquire more power. The problem, though, that I think it presents is it is a kind of bar on allowing large firms to compete. And that competition, whether it’s by small firms or large firms, benefits consumers. It lowers prices. It adds to innovation. It may disrupt industries that are very much in need of disruption, right. 


It may allow us to deal with the negative effects of regulation, right, which has skewed markets in ways that hurts consumers. And I think that that is not a place that we should want to go. I think again, right, like large firms get more antitrust scrutiny than other firms. They deserve that scrutiny. That’s absolutely fair. But taking the position that they cannot innovate, right, they cannot design products in ways that hurt their competitors. Hurt their competitors, by the way, perhaps by gaining market share because what they’re offering is better, I think that’s the wrong way to approach the question.


Koren Wong-Ervin:   So just to follow up a little bit on that and clarify. So when you talk about large firms deserving — I know you’ve written and talked before about without monopoly power, you really don’t have the ability to foreclose. So it’s sort of a necessary but not sufficient condition for a claim. But, of course, in the U.S., being big is not bad or having monopoly power is not. So just if you can talk a little bit more about your statement.


Hon. Noah Phillips:   Sure. Right. I mean, being big is not a problem. It’s not illegal, and in fact, as Justice Scalia wrote, right, the incentive to acquire monopoly power is part of what drives firms to compete in the way they do. But, right, Section II jurisprudence, or monopolization jurisprudence, which as you know requires the existence of monopoly power in the first instance, does sometimes look at certain kinds of conduct differently when they’re engaged in by a monopolist because foreclosure may be implicated, right.


So a time arrangement that might be innocuous for a non-monopolist might not be innocuous when undertaken by a monopolist. I suppose plausibly that would be true for certain kinds of product design, but what I don’t think you want to do is draw lines where you’re basically saying to large firms, “Don’t compete. Don’t innovate,” for the sole purpose of achieving the diminution, the size or power, however you’re defining it, of that firm. 


Svetlana Gans:   Great. So, Koren, did you want to ask any more questions? 


Koren Wong-Ervin:   No.


Svetlana Gans:   Okay. So I wanted to talk a little bit about rulemaking under the FTC Act. The report recommends that the FTC undertake rulemaking using its unfair methods of competition authority. The FTC hasn’t promulgated competition rules in quite a while, although some within the Commission currently, like Commissioner Chopra and Slaughter, believe that this is an untapped resource. What is your view on FTC rulemaking authority under Section 5, unfair methods of competition? And what would be potential limiting principles there? 


Hon. Noah Phillips:   Sure. So shortly after election night, can’t remember when, Zephyr Teachout, who is one of the witnesses at the final hearing associated with the publication of the House report, a professor at Fordham Law School, tweeted that, “Now, the democratic focus would shift to the FTC.” So I don’t know exactly what Professor Teachout meant by that. 


But what I do know is that we’re an agency, right, an independent agency within the scheme of the federal government. We sometimes make rules, but we’re not a legislature, right. We’re not supposed to be the focus of democratic action and political campaigns. Of course, right, we have comments that go along with rulemaking, much as rulemaking proposals but also consents. And we listen to what folks say.


But where the behavior is legislative, it ought to be in the legislature. That ought to be table stakes in our constitutional conversation. And so when I hear about proposals to make competition rules, some of the questions that I ask are did Congress give us this authority in the first instance? And I think that it’s a rare judge today who approaches the rulemaking question the way the D.C. Circuit did on consumer protection rulemaking in the 1970s in National Petroleum Engineers. I might be getting the name of the case wrong. It’s a rare judge who approaches that question that way today. 


And I think we also need to take into account, given what we were just talking about, right, the notion that antitrust should serve all of these different interests simultaneously, the notion that it has no limiting principle, right, that it is this sort of generalized government warrant to fight against an ill-defined power in the private sector. Where one’s view of a law is so capacious, and my view of the law is not so capacious, but if that is your view of the law, I think this runs us right up into serious questions about the nondelegation doctrine.


So I’ll give an example. if you go back and you read Schechter Poultry, right, where that doctrine comes from, they are grappling with the new deal which allowed the president of the United States to promulgate codes of fair competition. Now the proposal is to allow the FTC, not elected, to promulgate rules governing unfair methods of competition. 


At the time, no one was discussing us having rulemaking power, right. Then it was investigation power and you were bringing cases or maybe making recommendations to Congress, but now we’re talking about rulemaking. And so I have in mind Professor Teachout’s tweet and the notion that we ought to act like a legislature. And as a person who spent a little bit of time studying the Constitution when I worked on the Senate Judiciary Committee, that gives me a lot of pause. 


Koren Wong-Ervin:   Thank you. So let’s turn to monopoly leveraging. So one of the recommendations is to override the legal requirement that for a monopoly leveraging claim, you need to show that there will be actual monopolization in the second market as it set out in Spectrum Sports v. McQuillan. So I’d love to hear your thoughts on that, and there’s some case law even that talks about, like in the Ninth Circuit, that monopoly leveraging is not a standalone claim by itself. You need refusal to deal or some other claim and so the consequences of lessening this for monopoly leveraging. 


Hon. Noah Phillips:   Yeah. I mean, to me, those proposals speak very much to what we were all talking about a few minutes ago. And it’s this notion that we ought to mend the law or bend the law in a way to prevent companies that have some kind of market power, right, in the context of monopoly leveraging like Market A as opposed to Market B. We ought to prevent them from competing, right. They’re powerful enough already. We don’t need more power from them. That’s an argument. 


But what I think it puts squarely in view is the question of should there be a point of size or something else where you just want to stop a firm from competing more. And I think it raises that same set of questions about what about those consumers who benefit from that competition? What if that company has a capability, logistical capability or what have you, that it can bring to bear that can benefit innovation and benefit consumers? 


And I think drawing the lines in a way that prevent companies from competing means we really drifted pretty far from what we had in mind when we adopted laws to protect and stoke competition, right. We may be pursuing something, but — if you’re saying you can’t compete, competition ain’t that thing. 


Svetlana Gans:   Great. So along those lines, we talked about line drawing. The majority staff report recommends two forms of structural separations to eliminate the perceived conflict of interest faced by a dominant firm when it operates in markets that place it in competition with businesses that benefit from its infrastructure.


Microsoft analyzed structural separation, and the D.C. Circuit largely rejected that remedy in Microsoft. The report, interestingly enough, bars heavily from historical regulation, for example, from the railroad industry and the airline industries, largely that have been outdated right now. 


What is your view of mandated Glass-Steagall type of structural and business line separation as a matter of course? 


Hon. Noah Phillips:   The first thing I’d say is it’s important that everyone recognize the very mixed history of some of those regulatory schemes that were adopted to address concerns like this. I think it is fair to say that the history of railroad regulation in the United States is not a particularly good one. And I don’t know that it’s a model that we really like.


Glass-Steagall, it was pulled down in the Clinton administration. And that move got a little egg on its face because of some concerns with regard to the financial crisis, right, that risks were created that shouldn’t have been. Those are not the concerns that are animated here.


I think it’s fair to note in having this discussion that this behavior, right — I’m going to speak in very broad strokes here but having some sort of platform, competing on that platform, and maybe even preferencing yourself, at the very least, is fairly widespread in the economy. I go to Costco. Go to Costco, on the shelf, there’s the Kirkland brand right next to the other brand that Costco is supplying, and I can look at them and I can evaluate their quality, best I can. I can evaluate their price pretty easily. And that’s a pretty common thing that a lot of Americans deal with. 


And so I think the important thing here is to make that case for why either for a small subset of firms or otherwise for all the many firms in the economy that engage in this kind of behavior where you have this alleged conflict of interest, why that’s bad. I think that government attempts to structure industries often don’t end up pretty well. 


I think it reminds me of when Senator Warren rolled out her plan to break up three large tech companies at an event, can’t remember exactly when it was but I want to say it was 2019, maybe 2018. And a reporter came up to her at the press conference after the announcement had been made and offered the name of a fourth company. Well, what about Apple? To which she responded, yeah, break them up too. 


I think we have to think with a little bit more care about what the firm is, what the conduct is, what is the industry that we’re looking at, before we arrive at pretty aggressive remedies to problems that don’t necessarily present as problems in the first place. To be clear, it doesn’t mean that you couldn’t have harmful self-preferencing, right. A platform has opportunities to do things that other companies may not. And as I said before, monopolists, right, can engage in conduct that is otherwise okay that is bad when a monopolist does it.


But with that said, there’s nothing to me that jumps out that makes all these firms common in a way that a common form of structural separation really would help. 


Koren Wong-Ervin:   So let’s move onto another proposal which is to adopt an E.U. like abuse of dominance standard, right, so the notion that there’s special rules for monopolists. They need to — you can compete hard, pound the pavement, but once you become big, there’s special rules. 


And one thing that’s notable is that the report would create a presumption of dominance at 30 percent, which is even lower than the E.U.’s. The E.U.’s is around 40 percent. And in typical E.U. cases, usually 80 or 90 percent, and perhaps because they define narrow markets. One of the things in the report is it says — it suggests that current antitrust laws are harming the U.S. economy. 


And so to me, it’s an odd choice to adopt an E.U.-like approach if you’re trying to help the economy given that by so many markers, the U.S. is ahead, right. We have so many more innovative companies beginning in late stage financing. There’s surveys by McKinsey & Company, and there’s others citing the regulatory burdens in E.U. So I’d love to hear your thoughts on this and what you think of this choice in particular and what potential consequences might be.


Hon. Noah Phillips:   The first thing I’d note is my understanding is there’s a proposal in the New York State Legislature to do this as well. I don’t know where they set the threshold. My understanding is that is a process that is ongoing, animated by some of the very same advocates who very much support the House report. 


I think you’re right, Koren, to note that Europe isn’t necessarily the economic model that the U.S. wants to follow, that we’ve got a lot of innovation, that for all of its flaws and foibles, remains the envy of the world. I think you see a lot of talk in Europe about we want innovative technology companies or more innovative technology companies. We want competitors with the large U.S. firms. And I think that if you had to choose a system to generate that, it would be the one that has it, not the one that doesn’t. So that’s the first thing. 

The second thing is that it’s not clear to me that with European law the way it is, the Europeans feel that they’re solving all the problems, whatever they feel those problems are. In fact, what you see right now in Europe is an incredibly vigorous regulatory environment. Scarcely a month passes where some new proposal is not up at the E.U. level to adopt new laws. They’re thinking about ex-ante regulation. They’re thinking about new methods for enforcing or new tools, as they call them, for antitrust law.


It’s not clear to me that the abuse of dominance standard is doing the work that they want. So if you can’t make an argument that it is correlated with the kind of innovation that you want and you don’t view it as solving the problem where it is operative, it seems an odd solution to whatever problem they perceive here. 


Koren Wong-Ervin:   And just a follow up question of that, so one of the features of the E.U.-like approach is they don’t require actual competitive effects, right. They have a reasonably capable of standard that the conduct is capable of foreclosing, and then they have an inference that substantial foreclosure of an equally efficient competitor could harm. 


But in the U.S., we’ve traditionally — when you have backward looking conduct, said well, we have a real-world evidence of what happens. So let’s see, did prices go up? Did output go down? Did innovation go up or down? 


So what are your thoughts on the reasonably capable of for effects, not for causation but for effects, versus when you have backward conduct, should we actually be looking at what really happened. 


Hon. Noah Phillips:   The short answer is yes, we should. I think you’re right to note that that reasonably capable language pops up in Microsoft. I mean, it’s in the causation test. And I do think that lessens the government or plaintiff’s burdens with respect to causation. And I think that is not unwarranted, right. But to also do away with effects entirely, I think is the wrong move because you may end up punishing conduct that helps consumers. 


Koren Wong-Ervin:   Svetlana? 


Svetlana Gans:   Great. So I just had one question before we turn to audience Q&A. And this is — you know, you mentioned, Commissioner Phillips, at the beginning that you praised the report for being a thoughtful piece after a thorough investigation with congressional hearings, dozens of experts’ reports, thousands of pages of testimony, and there are experts on both sides. Some wanted changes in the digital economy in terms of antitrust laws, and some didn’t. 


At bottom, though, there was a stark difference on issues concerning industrial policy and the role of government, for example. And you came to the FTC after serving as chief counsel in the Senate. And I was just curious, wearing your former staffer hat as well as an FTC commissioner hat, where do we go from here in light of all of the differing opinions expressed throughout the congressional hearing process on this issue?


Hon. Noah Phillips:   Look, I think the place we go is the legislative process. And in a sense, that’s exactly the right way to do this as opposed, to say for instance, the rulemaking process. Congress with the President, they get to set the policy. And so if they take a view that we ought to redo the law in a certain way, they’re the right body to do that. They’re the democratically responsive body. They’re the body that is held accountable for the decisions that they make. They can take that broad view with a lot of different things in mind, right. 


If they want to take into account workers, they can do that. That’s absolutely within the policy making purview of the legislature. Where exactly we’re going to end up, I’m a terrible prognosticator when it comes to what legislation will be adopted. The one thing I always tell Congress when I’m testifying, and I think is really important to keep in mind, is that you want to focus on what the harms are that you’re solving.


Too much of the debate about tech is a lot of different issues that bleed into one another. So someone will be concerned about a content moderation decision and they’ll say break them up without a real grappling with, I think, with well, how does a breakup solve that problem?


By the same token, privacy, right. We have a lot of concerns about privacy with big tech companies but also small companies. I think those are valid concerns we ought to talk about and we ought to legislate on them. But just assuming that competition will solve all the problems isn’t always true for things that are not born out in market forces. 


And so I think part of what Congress has to grapple with is are we thinking about this as a competition issue versus some other kind of issue that we as Congress are perfectly entitled to legislate on?


Koren Wong-Ervin:   So before we go to Q&A from the audience, I just had a flow up question. So with respect to the clearly lot of work that was done on this, some people would say that it’s a lot of anecdotal evidence or citing studies on one side without the critiques. So for the merger proposals, the only study cited is the Kwoka one, which has been widely criticized, right, including by Chairman Simons and of course the excellent work of Mike Vita and his colleague at the FTC.


So some would say it’s one sided, right, and maybe cherry picks some evidence. So for example, when they’re saying that entrepreneurship is down, they cite data from the dot com boom through the Great Recession. And so for me, there’s always a difference between a long report and clearly hard work, no doubt, and a balanced report.


Hon. Noah Phillips:   Yeah. And I think I used the word indictment earlier, right, with respect to certain firms. I think that there’s a lot of people taking issue, validly with a lot of underpinnings. I, for one, would like to hear more legislators recognize that the data on falling innovation is not remotely as clear, in fact, it may be contrary, right. There’s tons of money coming at companies at different stages of development. We can talk about why we’re moving to private markets as opposed to public offerings. Why SPACs are hot right now, a lot of related issues. So I think that it is very fair to make those criticisms, absolutely. 


What I meant to begin with, though, is as a staffer, I do think in terms of forming a political narrative, I don’t agree, obviously, with everything in the report. But I think that they’ve done really good work advancing their view with the world. I don’t share that view. And I think we ought to have a real debate. That’s part of what the legislative process is for. But I don’t think — I think it is fair to say that the authors worked very hard and produced a product that helped advance their vision. 


Koren Wong-Ervin:   So my very last question is so to me, when you have thriving innovation and in some markets exponential output growth from certain acquisitions, the burden is really on the party that wants to radically change antitrust to prove that we have some sort of a problem in search of a solution. And so we’ve talked about this on another panel on potential competition, and I’ve written a lot about it looking at the studies that are pointed to.


I think mostly they’re pointing to theoretical. And of course, theory’s important but it doesn’t tell us anything about whether we have systematic underenforcement and harm to competition. So I’m wondering what you think about the available evidence. Is there sufficient evidence we have a problem? Do we need more? 


Hon. Noah Phillips:   I want to step back for a minute and make the following claim, and people can quibble with it if they want to. We talk a lot lately in the U.S. about this shift that happened in the late ‘70s and early ‘80s, a combination of jurisprudence and economic learning and enforcement priorities in the Reagan administration. And the claims generally made that this was some sort of bad shift in antitrust enforcement and this ended us up in, whatever the claim, horrible situation we now inhabit. 


It’s not clear to me that all the things that have happened since then in the economy and in particular some of the target areas here are all that bad. The U.S. has been terrifically innovative. We’ve seen a lot of growth, including of startups. Those are things that need to be taken into account in moving forward with how we rejigger the law if we’re going to rejigger the law.


My preferred approach is to identify areas where it’s clear we have problems and try to figure out what the best solutions are. Sometimes, those are solutions that are going to be arrived at through the legislative process. They may even be related to competition law. I’ll cite an example. 


Sometimes, you’ll hear my colleagues complain when we settle an antitrust action that we’re not litigating enough. What I think that critique neglects is the fact that Congress was really concerned about messy litigation and breakups in the 1970s when they adopted the Hart-Scott-Rodino reform standard type law. What Congress wanted was a neater, cleaner process that hurt fewer people. So they gave the agencies a look ahead of time at some of the deals that were happening.


The fact that we have less litigation and can settle more things through consents is a feature, not a bug. But that was identifying a particular problem and a solution arrived at to address it, and I think it was a success. And my view is some of these problems might be problems with competition law. A lot of these problems aren’t competition law problems. They may require regulatory solutions.


Privacy is a good example. It’s not clear to me that because of the way consumers reveal their preferences that antitrust enforcement is going to solve the issue. And I think we just need to be clear about what are the problems we think we see. To your point about evidence, is it actually a problem, right? Is that born out? Speaking in 90,000-foot generalities about corporate power don’t do that work. 


Svetlana Gans:   Great. So I think we can turn to audience questions. We have two questions so far, and folks, if you do have a question, please go to the chat. Let’s ask the first two questions that we have. And this one is along the lines of what we’re discussing. The question is, “My basic hope is that these horrific proposals get bogged down in the legislative process and don’t go anywhere. But my fear is that there might be a bipartisan push for some reform because conservative populism is sympathetic to some of this. That might be the end of the golden age of antitrust. Do you have a sense of the politics of the issue?”


Hon. Noah Phillips:   I mean, I think populous politics are a part of this. This is not new to the American experience. Concern about, frankly, corporate power are not new to the American experience. That’s some of what animated the Sherman Act in the first place. It’s some of what animated the Clayton Act and the FTC Act in the Wilson Administration or at the statutes I spend a lot of time enforcing. 


And I think that’s part of what we see today. Bill Kavacik has a great paper in 1989 about waves and antitrust and the politics that they follow. And if you read that paper from 1989, 31 years ago today, it very much looks like the present.


So I think that’s a fairly accurate characterization. To me, the most important point is there are a lot of people angry at a lot of companies for a lot of different things. It’s important to focus on the fact that a lot of these proposals go far broader than those companies. And to the extent you’re predicating a broad-based legal change on a particular issue that you have, I do think the burden is on the proponent to demonstrate why we ought to effectuate that change more broadly with all of the consequences that that may have. 


Koren Wong-Ervin:   So another question we got from the audience is, “In the example of the Costco and self-preferencing harm, how do you view the argument which posits in digital markets and traditional stores — that digital markets and traditional stores have different market structures due to network effects? Does this parallel formalistic but not functional?”


So are these markets different, right? Basically, we saw that the ICN has a new report on this and some people say oh, it’s just so different, right. We got to have special rules, with other people saying well, network effects can cut both ways. We don’t need to throw out everything, like you said earlier. So what are your thoughts on that? 


Hon. Noah Phillips:   So I think it’s fair to identify network effects as something that happens in certain kinds of markets with profound implications for how competition looks. That is an absolutely fair position to take. And I think to neglect the existence of network effects, we’d be remiss.


Those network effects can operate in beneficial ways as well. I suspect, for instance, that if, let’s say, Amazon Prime or just the Amazon website were not as popular, that many of the small sellers that gain access to markets through that would not be as benefitted were it not for network effect. And whether those network effects are direct, meaning your utility in using the thing is greater because of more people using it, or indirect, the utility of an advertiser is greater because more people use the product unless you can push advertising to them, it’s a much more fact-specific question than simply saying network effects and so this or that solution is warranted. 


Svetlana Gans:   Great. So one other question we received, and you talked a little bit about it and Koren did too, but the question says, “Both the Cicilline Report and Chairman Simons have been signaling increasing worry about the acquisition of nascent competitors. Do you share their worries that this problem is growing in an area deserving of more scrutiny?”


 Hon. Noah Phillips:   Let me start with the second part of the question. I do think this area is worthy of real scrutiny, right. We have brought cases — you can pick out the Illumina case, the Harry’s Razor case, identifying this sort of version of this. There is really important literature in the pharmaceutical space about filler acquisitions, which are a subspecies of nascent or potential competitions where the effect of the acquisition is apparently to take the thing off the market, like it’s an absolute reduction in consumer welfare. So I think that’s an area that we’re scrutinizing more that we should be scrutinizing more and maybe our error cost framework is shifting a little. 


But I want to come back to something we were talking about earlier and that is startups. Over-correcting in this space presents a real threat as well. And I don’t think we should neglect the value to consumers, to competition, to innovation, to American competitiveness of the incredible market that we have investing in startups. 


It’s great to live in a country where it’s not hard to find capital. For the most of world history, that has not been true. It’s not even true in advanced capitalist democracies. We certainly don’t need the government to be or want the government to be the principal backstop for providing capital at risk to businesses. You can imagine the disaster that that might be. 


And so when we think about these issues, and we need to be thinking about these issues, I do think we want to be very wary of over-correcting. 


Koren Wong-Ervin:   Okay. Another question we got was, “Do you believe that non-structural remedies such as firewalls or common ownership theories are still susceptible to similar concerns about chilling innovation?”


Hon. Noah Phillips:   That’s an interesting question. I would say that — and this is consistent across agencies and enforcers. I have a general preference, especially when we’re doing ex-ante merger control or structural remedies. It’s cleaner. It requires less supervision. Although, sometimes structural remedies, even in merger control, require some level of supervision just to get things off the ground. But as a general matter, that’s my preference.


I’m hesitant to shut the door absolutely to behavioral remedies because I think there may be times where a structural remedy, for whatever reason, just doesn’t work, and you can still preserve value in the merger. Sometimes, we have to go to court to block things entirely where there’s no problem. But definitely, the preference is on the structural side for ex-ante merger review. 


Koren Wong-Ervin:   So a follow up question to that, to me, there’s a difficulty sometimes with defining what is a conduct remedy, right? So some people have said we don’t really like behavioral or conduct because it’s more regulatory and requires ongoing overview. But for me, in the AT&T-Time Warner, the arbitration remedy that was proposed doesn’t require that ongoing sort of regulatory, right. It was an independent tribunal that would be deciding. 


So any thoughts about how do we decide, and was structural remedies is your answer sort of the same when it’s long consummated, ten years ago, double click. Shall we still do structural breakup only? 


Hon. Noah Phillips:   So I was — I think the preference that people articulate is in particular with respect to ex-ante merger review, right. It’s giving effectuation to Congress’s vision in Hart-Scott-Rodino that we settle as best we can things rather than having messy court fights. The longer on you go in time, the longer the court fight takes, the less confidence you probably have that a structural remedy will work. 


There may be integration that you’re getting rid of it and consumer loss. And you probably run up right into where you began your question with something that looks a lot more behavioral than it does structural, right, because the process of just breaking things apart, it’s not so easy. And the record on that by U.S. enforcers is spotty. 


I gave a speech about that like a year ago, probably more than a year ago, at the Hudson Institute. And it kind of walks through two of the famous examples of structural breakups much later on in the process, one of which was a really more of a merger case, that’s Standard Oil. Thought, it wasn’t exclusively a merger case. And the other one of which AT&T, less so.


A lot of people view AT&T as a very successful breakup, and I think that’s important for us to keep in mind. But by the same token, even Standard Oil, like the granddaddy of antitrust enforcement, canonical case for 17 different things in the world that we all occupy, was arguably not so successful, right? And in fact, one of the first things that the Federal Trade Commission was charged with doing in 1915 when we were started is trying to figure out why prices for oil were going up. 


And part of that may have been, a lot of people think, because you had taken an incredibly efficient distributor, the most efficient corporation probably in human history at that point, and — or introduced inefficiency. And there may be benefits to that, but there also were costs. Such costs that, again, that was one of the first gob of the fledgling for every trade commission. 


Koren Wong-Ervin:   So we have a couple more questions, but I noticed we only have a few minutes. I don’t know if you want to give some closing remarks or take one more question, Commissioner?


Hon. Noah Phillips:   I’m happy to take another question. I do have to go to a meeting at noon, but I’m happy to take a question.


Koren Wong-Ervin:   Svetlana, you want to pick one? 


Svetlana Gans:   Sure. So I’ll ask one more question. “If Congress were to place all civil antitrust enforcement in one agency, which should Congress pick?”


Hon. Noah Phillips:   So this was the topic of an op-ed this morning in the Wall Street Journal by Senator Mike Lee. I am a fan of Senator Lee. I had the great privilege of working with him and his staff for many years on the Senate Judiciary Committee. I don’t support getting rid of the FTC’s antitrust jurisdiction. I think we’ve done a lot of great work over the years.


But I will say though, the problem Senator Lee is talking about in terms of clearance and having two agencies and being in court against one another, those are real problems. And I do hope that his idea stokes conversation about how to solve them. 


Koren Wong-Ervin:   Wonderful. Well, we know you have a meeting. So and we really appreciate your time. So I think we’ll close it here. Apologies to people we didn’t get your questions. But thank you so much, Commissioner. And it’s been a really fantastic discussion.


Hon. Noah Phillips:   Well, thank you guys for having me, and thanks to FedSoc. I think FedSoc does as good a job as any organization for stoking important conversation about law, about philosophy, about policy, and I’m just privileged to be a part of it.


Koren Wong-Ervin:   Wonderful. Thanks to our audience. Everyone, happy holidays and stay safe. 


Hon. Noah Phillips:   Thanks.




Operator:  On behalf of The Federalist Society’s Regulatory Transparency Project, thanks for tuning in to the Fourth Branch Podcast. To catch every new episode when it’s released, you can subscribe on Apple Podcasts, Google Play, and Spreaker. For the latest from RTP, please visit our website at That’s 


This has been a FedSoc audio production.

Svetlana Gans


Gibson, Dunn & Crutcher, LLP

Noah Phillips


Federal Trade Commission

Koren Wong-Ervin


Axinn, Veltrop & Harkrider LLP

Antitrust & Consumer Protection

The Federalist Society and Regulatory Transparency Project take no position on particular legal or public policy matters. All expressions of opinion are those of the speaker(s). To join the debate, please email us at [email protected].

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